The existing provisions of the Income-taxAct provide for the taxation of any perquisites or allowances received by an employee under the head “Salaries” unless it is specifically exempt under the Act.

Currently, specified perquisites of the Chief Election Commissioner or Election Commissioner and the judges of the Supreme Court are exempt from taxation consequent to the enabling provisions in the respective Acts governing their service conditions. It is proposed to amend section 10 to extend similar benefit of exemption in respect of specific perquisites and allowances, which will be notified by the Central Government, received by both serving as well as retired Chairmen and Members of the Union Public Service Commission.

This amendment is proposed to take effect retrospectively from 1st April, 2008 and will accordingly apply in relation to the assessment year 2008-09 and subsequent years.

Note to the Above

Clause 4 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.

The Explanation to clause (34) of the aforesaid section was inserted by way of a modification vide section 27 of the Special Economic Zones Act, 2005 read with the Second Schedule thereof.

The existing provisions contained in the Explanation to clause (34) of the aforesaid section clarify that the dividend referred to in section 115-0 shall not be included in the total income of the assessee, being a Developer or entrepreneur.

Sub-clause (a) of this clause of the Bill seeks to omit the Explanation to clause (34) of the aforesaid section.

This amendment will take effect from 1st June, 2011.

Under the existing provisions contained in the Income-tax Act, any perquisites or allowances received by an employee is taxable under the head “salary” unless it is specifically exempted under the Act.

Sub-clause (b) seeks to insert a new clause (45) in the said section so as to provide exemption to any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission.

This amendment will take effect retrospectively from 1st April, 2008 and will, accordingly, apply in relation to the assessment year 2008-2009 and subsequent years.

The existing provisions contained in section 10 provide that income mentioned in any of the clauses of the said section shall not be included in the total income of the previous year of any person.

Sub-clause (c) seeks to insert a new clause (46) in the said section so as to provide that any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) which is constituted or established by or under a Central, State or Provincial Act or has been constituted by the Central Government or a State Government with the object of regulating or administering an activity for the benefit of generalpublic shall be exempt if it is not engaged in commercial activity and is specified by the Central Government by notification in the Official Gazette in this behalf. The proposed Explanation enables the Central Government to notify the nature and extent of the income of the body or authority or Board or Trust or Commission which shall constitute the specified income.

Sub-clause (c) also seeks to insert a new clause (47) in section 10 so as to enable the Central Government to notify any infrastructure debt fund which is set up in accordance with the guidelines as may be prescribed and the income of such notified fund will be exempt from income-tax.

These amendments will take effect from 1st June, 2011.


Clause 4  as Provided in Finance Bill 2011

4.       In section 10 of the Income-tax Act,

(a)      in clause (34), the Explanation [as so inserted by the Special Economic Zones Act, 2005]   shall be omitted with effect from the 1st day of June, 2011;

(b)      after clause (44), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2008, namely:

“(45) any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission;”;

(c) after clause (45) as so inserted, the following shall be inserted with effect from the 1st day of June, 2011, namely:

‘(46) any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) which

(a)      has been established or constituted by or under a Central, State or Provincial Act, or  constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public;

(b)      is not engaged in any commercial activity; and

(c) is notified by the Central Government in the Official Gazette for the purposes of this clause.

Explanation.— For the purposes of this clause, “specified income” means the income, of the nature and to the extent arising to a body or authority or Board or Trust or Commission (by whatever name called) referred to in this clause, which the Central Government may, by notification in the Official Gazette, specify in this behalf;

(47) any income of an infrastructure debt fund, set up in accordance with the guidelines as may be prescribed, which is notified by the Central Government in the Official Gazette for the purposes of this clause.’.

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